Debt-to-income ratio
A lender's measure of monthly debt payments as a percentage of gross monthly income. Lower is better. Most conventional loans cap it around 43% to 50%.
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See how it worksWhere this comes up: on the market
Part 1 of 4
Why a seller cares
DTI is the number most likely to sink a buyer's loan late in the process. A new car payment during underwriting can push a buyer over the cap, and that is a deal ending for a reason your house had nothing to do with.
Part 2 of 4
A simple example
A buyer earns $7,000 a month before tax. Their new mortgage payment would be $2,000 and their other debts $900, so their DTI is about 41%.
| What happens | The buyer's DTI |
|---|---|
| Nothing changes | 41%; inside most lenders' limits |
| They finance a car with a $500 payment during underwriting | About 49%; near or over the line |
| A co-borrower's income is added | Lower; the loan is safer |
A buyer's loan stays approved as long as their numbers do. Big purchases before closing are how the numbers move.
Part 3 of 4
What people get wrong
That preapproval settles it. DTI is checked again before closing, and it is the check that a new debt fails.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
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